Government's caution in awarding TV licences is justified

Robert Chua says the advertising revenue pie in Hong Kong is simply too small to support five television stations, and the government was right not to grant all three new licences

PUBLISHED : Monday, 04 November, 2013, 6:33pm
UPDATED : Tuesday, 05 November, 2013, 4:02am

I speak from almost 50 years of experience in the TV industry, having worked my way up from the lowest ranks in TV production in Australia, worked in Singapore, helped start TVB, and then owned and operated a private television channel in the 1990s.

Had it been up to me, I would have recommended the government grant only one new free-to-air TV licence instead of the two that were awarded, and certainly not the three the public feels it should award. It would be irresponsible of any government to award more licences, knowing that at least one station will certainly fail.

Some say the market should decide. I would argue that, due to the limited TV advertising revenue in Hong Kong, there is no way five television stations can survive: leader TVB would see its profits fall and the rest would bleed badly, with one succumbing to a quick death within two years.

Since two licences were awarded, the government's decision to grant them to the more experienced i-Cable's Fantastic Television and PCCW's Hong Kong Television Entertainment was correct.

TV viewer numbers will continue to fall as people turn to the internet for entertainment. They watch movies, play games and catch up with TV shows on demand, such as through TVB's myTV. Free TV channels will gradually lose their prominence and popularity.

I urge the public not to protest for the sake of protesting, without understanding the local TV industry

I urge the public not to protest for the sake of protesting, without fully understanding the dynamics of the local TV industry. Hong Kong people should not support awarding a third free-TV licence just because they resent the government, TVB and/or ATV. In fact, many of the protesters hardly ever watch TV.

One must realise that the 200-plus hours of drama that Hong Kong Television Network claims to have produced would last less than two months, assuming only four hours of the programmes were aired per day.

The Association of Accredited Advertising Agencies of Hong Kong recently issued a statement of support for more licences to be granted so viewers could have more choice and better programmes. I beg to differ: without the advertising dollars to support the programmes, what are the chances we'll see high-quality shows? You need a decent budget to produce quality programmes. To be able to choose among equally poor programmes is no choice.

Take Singapore as an example. It started with one TV station in 1963 and, in 2001, the government awarded a licence to a new player, Singapore Press Holdings. For a while, Singapore had two stations competing, like we do here with TVB and ATV. But, less than four years later, the two stations merged because even with government backing, they could not survive on the limited advertising expenditure available. Singapore continues to have one TV station to this day.

In Hong Kong, TV advertising expenditure amounted to over HK$7 billion last year. Deducting agency commission fees, the cost of producing commercials, endorsement fees for celebrities, etc., it would probably leave a sum of about HK$4 billion to HK$5 billion. Imagine that is to be shared between four or five stations.

TVB earned over HK$3 billion in advertising revenue last year, with gross revenue reaching HK$5.45 billion, and generated a profit of about HK$1.7 billion. This means its operating costs were about HK3.75 billion. Of this, I estimate its operating costs just for the local channels were about HK$2 billion a year.

To operate five stations on a similar scale would mean total annual costs of HK$10 billion. With TV ad revenue of some HK$5 billion, that would mean a loss of about HK$5 billion - to be shared by all the stations. If TVB continues to make a profit of HK$1.7 billion, then the other four stations would incur even more losses.

Even if we lower the operating costs to HK$1.5 billion a year, ad revenue would still fall short of the total operating costs of five TV stations.

My informed estimate of ATV's current operating costs is no more than HK$500 million per year, which is why we see so many repeats of old programmes and hardly any local productions. In my opinion, HK$1.5 billion a year is needed to operate a station that could compete with TVB and offer good-quality programmes, or we would end up with another ATV. (This could perhaps be lower for Fantastic TV and Hong Kong Television Entertainment, given the strong support they have from Cable TV and Now TV respectively.)

A decent budget does not guarantee good television, but a low budget means only poor-quality programmes.

I give Ricky Wong Wai-kay full marks for his passion and self-confidence in wanting to operate a free-to-air station. I suggest that he continue to produce content for TV and new media while he waits to apply to take over ATV's free-to-air TV licence, which is due to expire in 2015. I cannot see how ATV could be allowed to renew its licence with its incredibly poor performance in the past few years.

Today in Hong Kong, TVB produces many poor and degrading, bad-taste programmes in a bid to attract a bigger audience, but in the process it "pollutes" our youngsters with these lap sap (rubbish) shows. TVB does produce some good shows, so why does it produce all this lap sap that undoes its good work?

I wish our commercial TV stations shared RTHK's mandate to produce high-quality and socially responsible content.

I urge the government to impose stricter conditions on licensees to produce a certain number of hours of local programmes (of different genres), and require them to air only locally produced programmes at certain times of the day, such as prime time. Also, we need to limit the number of times a show can be repeated on free TV. Free-to-air TV channels are different from cable channels and they must abide by stricter conditions.

With responsible broadcasters, we hope to see TV stations producing more good programmes and discovering new talent, as TVB did in the first three decades.

Veteran broadcaster Robert Chua was the founding production manager and creator/executive producer of Enjoy Yourself Tonight at TVB, Hong Kong's first terrestrial TV station, and founder of satellite TV station CETV